Fuji Heavy Industries gives up plans to build cars in China, will boost North America production

Article by Anita Panait, on May 9, 2012

Fuji Heavy Industries Ltd., the parent company of carmaker Subaru, has dropped plans to manufacture vehicles in China after failing to secure the Chinese government’s approval for a joint venture with a domestic car company. Fuji Heavy had applied to create a joint venture with Chery Automobile Co. to build Subaru cars in China.

The joint venture with Chery was part of the company’s five-year plan that aimed to lift global sales by 40 percent to 900,000 vehicles by 2016, driven mainly by a trebling in Chinese sales.

Following the let-down, Fuji Heavy cut its global sales targets for the period by 50,000 vehicles. The company revealed plans to increase its manufacturing capacity in the United States and Japan by a combined 45,000 vehicles per year by mid-2014. The company is also mulling to expand its operations in North America beyond the five-year plan.

After the failure to create a joint venture, Fuji Heavy would now be forced to continue importing cars into China. The Chinese government’s refusal to approve the joint venture could be traced to a stricter rule on allowing foreign carmakers to produce vehicles in the country. Earlier this year, China disabled incentives for foreign investments but remained open to ventures that encourage assembly of advanced vehicles like hybrids and electric cars.

However, the approval process became tighter and China is imposing a 25 percent tariff on imported cars. Yasuyuki Yoshinaga, president of Fuji Heavy, remains optimistic about his company’s future in China, saying that they have not given up on hopes to produce in the country and will wait for any development. Yoshinaga, who will replace Ikuo Mori as Fuji Heavy’s new chief executive in June, also conceded that plans to build cars in China starting 2013 are no longer realistic. [source: Autonews]

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Topics: china, subaru, production

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